Mini-Budget U-turn: “The age of the saver may be back.” – reaction from brokers and IFAs

by | Oct 17, 2022

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Following the impact of today’s political announcement on borrowers and savers, a selection of IFA and Brokers have commented.  

Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial: “On a day where gilt rates could have increased further as the Bank of England withdrew its support for the bond market, they have stabilised. This means mortgage rates shouldn’t go up further in the near term. Savers are having a bonanza with 1-year savings bonds in excess of 4%. They will stay there for now, but if there’s more chaos they could go up further still. The age of the saver may be back.”

Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages: “Backtracking isn’t going to help millions of mortgage customers who have already been left up the creek without a paddle. Monday’s announcement by the new Chancellor may calm the markets, but mortgage lenders are currently swamped with applications due to the tidal wave that followed the now doomed mini-Budget. Lenders are not simply going to lower interest rates overnight because they will drown with a further influx of applications. The average worker is not only now facing sky-high mortgage payments and the insane cost of living, but with the scrapping of the reduction of the basic rate of tax and the undecided future for the energy support post April, the British public have been well and truly been hung out to dry.”

David Robinson, co-founder at London-based Wildcat Law: “We are in one of those perfect storms where asset classes become more closely correlated, that is, they behave the same. The usual safe havens of gilts are now carrying more risk than many so called riskier asset classes. Anyone carrying mortgage debt that is not on a long fixed rate will suffer as rates return to levels many people have never experienced before. The winter of discontent and the troubles of the 1970s may turn out to be child’s play compared to 2023.”

Mike Staton, director of Mansfield-based Staton Mortgages: “It feels like the government are playing darts whilst wearing a blindfold. This U-turn just shows what a complete farce the past 4 weeks have been. I don’t expect to see mortgage rates reduce anytime soon, as there is still a lot of uncertainty in the air which will cause the Bank of England to play it cautiously. I won’t be surprised if we see a base rate increase of 0.75% to 1% in November. Let’s not forget, lenders also appear to not want to lend at the moment so their fixed rates do not have to drop, however, there may be light at the end of the tunnel with 5-year swap rates dropping to 4.1% and 2-year swap rates dropping to 4.7%. The biggest hammer blow is the shortening of the energy bailout to April, with many people paying nearly £200 a month extra for their mortgage, £150 more for fuel in their vehicle and an extra £100 on their monthly food shop, a further increase in energy costs in April is something people do not want to even contemplate. This decision could see Liz Truss become the shortest serving Prime Minister the UK has ever seen.”

Lewis Shaw, founder of Mansfield-based Shaw Financial Services: “These past four weeks have been nothing short of an omnishambles. If someone told me I’d been living in an episode of The Thick Of It, I’d believe it because I’m struggling to differentiate between reality and fiction. Thankfully, it looks as though gilt yields will begin to calm down. However, no-one should be under the illusion that we will see mortgage rates fall off a cliff edge. We’re not out of the woods yet and this entire economic experiment will affect us all for longer than we’d like.”

Aaron Strutt, product and communications director at Trinity Financial: “The hope is that the cost of mortgage borrowing will at least come down a bit rather than continue to rise. We are now in the crazy position where ten-year fixes are cheaper than many two or five-year deals and we need some normality to come back to the market.”

Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com: “The sweeping reversal of Truss’s mini-budget should bring economic stability and may see fixed rate mortgage products become temporarily cheaper, if gilt yields continue Monday’s decline. However, they will probably increase again around the time of the next Bank of England MPC meeting on November 3rd, when the base rate is widely expected to be hiked by at least 0.75%.”

Marcus Wright, MD of independent mortgage broker, Bolton Business Finance: “Unfortunately, this so called mini-Budget U-turn will do little in reality to help the massive economic issues we are facing. We will still have sky high inflation, energy prices through the roof, turmoil in the conservative party and it’s extremely likely the base rate will increase next month. We may see some small benefits from a slightly stronger pound and lower bond yields, which could take the pressure off mortgage rates. However this could be short lived, as sentiment in financial markets can change in a heartbeat when the next crisis comes along.”

Mark Robinson, Managing Director of Southampton-based Albion Forest Mortgages: “Potentially we may be looking at a U-turn on interest rates, which will favour borrowers and negatively affect savers. However, it may be too late and the damage may have already been done. As of Monday lunchtime, we have seen no early indications from lenders that they intend to change anything yet. It could well be that it takes a few days or weeks before we see any kind of movement as they keep rates high in order to get on top of the volumes they have been facing lately.”

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